ROME
Research On Money in the Economy
No. 13-11 – September 2013
Doomsday for the Euro Area – Causes,
Variants and Consequences of Breakup
Ansgar Belke and Florian Verheyen
ROME Discussion Paper Series
“Research on Money in the Economy” (ROME) is a private non-profit-oriented research network of and for economists, who generally are interested in monetary economics and
especially are interested in the interdependences between the financial sector and the real economy. Further information is available on www.rome-net.org.
ISSN 1865-7052
Research On Money in the Economy
Discussion Paper Series
ISSN 1865-7052
No 2013-11, September 2013
Doomsday for the Euro Area – Causes, Variants and
Consequences of Breakup
Ansgar Belke and Florian Verheyen
Prof. Dr. Ansgar Belke
University of Duisburg-Essen
Department of Economics
Universitaetsstr. 12
D-45117 Essen
e-mail: [email protected]
and
Institute for the Study of Labor (IZA) Bonn
Schaumburg-Lippe-Str. 5 – 9
D-53113 Bonn
Florian Verheyen, M.A.
University of Duisburg-Essen
Department of Economics
Universitaetsstr. 12
D-45117 Essen
e-mail: [email protected]
The discussion paper represent the author’s personal opinions and do not necessarily reflect the views
of IZA Bonn.
NOTE: Working papers in the “Research On Money in the Economy” Discussion Paper Series are
preliminary materials circulated to stimulate discussion and critical comment. The analysis and
conclusions set forth are those of the author(s) and do not indicate concurrence by other members of
the research network ROME. Any reproduction, publication and reprint in the form of a different
publication, whether printed or produced electronically, in whole or in part, is permitted only with the
explicit written authorisation of the author(s). References in publications to ROME Discussion Papers
(other than an acknowledgment that the writer has had access to unpublished material) should be
cleared with the author(s) to protect the tentative character of these papers. As a general rule, ROME
Discussion Papers are not translated and are usually only available in the original language used by the
contributor(s).
ROME Discussion Papers are published in PDF format at www.rome-net.org/publications/ .
Please direct any enquiries to the current ROME coordinator
Prof. Dr. Albrecht F. Michler,
Heinrich-Heine-University of Duesseldorf, Department of Economics, Universitaetsstr. 1,
Build. 24.31.01.01 (Oeconomicum), D-40225 Duesseldorf, Germany
Tel.: ++49(0)-211-81-15372
Fax: ++49(0)-211-81-15261
E-mail: [email protected]
[email protected]
Abstract
In this paper we describe the genesis of a doomsday scenario and discuss potential causes and
motivations for a breakup of the euro area. For this purpose, we differentiate between the
departure of weak and strong countries, and examine the impact of the reintroduction of a
national currency on domestic debt, the domestic banking sector, EU membership and the
freedom of trade. We also briefly analyze the social and political costs of the accompanying
social disorder.
JEL-Classification: E58, F33, F41
Keywords:
banking crisis, debt crisis, exchange rates, euro, optimum currency area,
secession
Corresponding author
Professor Dr. Ansgar Belke, Chair for Macroeconomics, University of Duisburg-Essen,
Department of Economics, 45177 Essen, phone: +49 (0)201/183-2277, fax: +49 (0)201/1834181, e-mail: [email protected].
The paper has been published in the International Journal of Financial Studies (formerly
Finance), Vol. 1/1, S. 1–15.
1. Euro area breakup – Some basic foundations
1.1 Preliminaries
It is time to admit that under the prevailing structure and membership, the euro area simply
does not work successfully. Either the current institutional setting or the composition of its
membership will have to undergo changes. This has led many observers to describe potential
doomsday scenarios, including the conclusion by [1] that “the euro should not exist (like
this).”
Some analysts still contend that the euro zone will evolve – even if rather slowly, and with
much pain – into a state resembling fiscal integration, attaching a relatively high probability to
this outcome [1]. But this may be wishful thinking. Other observers offer an alternative
prescription for restoring competitiveness and growth on the periphery: “Leave the euro, go
back to national currencies and achieve a massive nominal and real depreciation” [2]. But the
idea of seceding from the euro today remains largely viewed as unimaginable, even in Greece
and Portugal [2]. Countries belonging to the Economic and Monetary Union (EMU) cannot be
expelled from the common currency, but sovereign nations could evidently secede. This
breakup option is associated with substantial risk, is extraordinarily costly and is hence
assessed as being a very improbable event. The economic and political impacts of such
secession are often heavily underestimated in the current popular discussion of potential euro
area breakup [1]. For instance, the exit of a weak country from the euro zone would lead to
significant trade losses in the remainder of the euro area. Among the main likely outcomes
would be a large-scale depreciation of the home currency and the imposition of large capital
losses on private creditors [2].1
Nevertheless, scenarios considered to be inconceivable just months ago may not appear so
far-fetched in the near- to medium-term future, particularly if peripheral countries’ economies
continue to stagnate.
Debt restructuring of the type pursued in Greece may ultimately take place in other euro
area countries. However, neither the exact time nor the specific mode, orderly or disorderly,
can today be predicted. Moreover, debt reduction and/or restructuring might not prove
sufficient to restore competitiveness and growth. If the lack of growth continues, the option of
seceding from the monetary union could become a dominant end-game strategy for some
current euro area members. As Feldstein [4] notes: “Uniform monetary policy and inflexible
exchange rates will create conflicts whenever cyclical conditions differ among the member
countries.”
Rather than systematically assessing the most widely discussed options for keeping the
euro together, this paper investigates likely channels for the transmission of economic
impacts, as well as the overall consequences of breaking up the euro – thus, the variants of
doomsday for the euro area [1].
1
A quite similar mixture of channels was observed when Argentina “pesified” its dollar debt in the course of its
recent crisis. See [3]. 1.2 The problem with the euro and the anti-euro bet
A breakup of the euro area is a realistic issue because the EMU project was in the 1990s
sold to the population of Europe in a rather misguided manner, primarily as an exchange rate
integration project [1]. On many occasions, the benefits of eliminating intra-European foreign
exchange rate uncertainty or the absence of other costs associated with trade, foreign direct
investment and tourism were underlined [5,6]. But with the benefit of hindsight, the most
important implication was the supranational integration of monetary policy, significantly
shifting responsibility for policy oversight from a Bundesbank-rooted institution to a
European Central Bank (ECB) permanently involved in quasi-fiscal operations [7]. A euro
promoted on the basis of monetary union with a central bank conducting quasi-fiscal
monetary policy in the Japanese style, rather than on the idea of exchange rate integration,
would have been far more difficult to make palatable to the electorate [1].
However, the problems of this type of monetary union remained largely out of the public
eye, as politicians too long adhered to a “this time it’s different” view [8]. Ironically, the
current situation, with interest rates too low for the core and too high for the periphery, is the
mirror image of the initial EMU period [9,1].
Increasing divergence within the euro area was able to stay below the surface for so long in
part because governments regularly tend to overlook threatening negative economic
developments that appear disguised as bubbles, or, as under Jean-Claude Trichet’s ECB
presidency, leveraged balance sheets maintained by financial institutions, private actors and
the government [7,1]. As a result, the euro area was even expanded beyond its initial phase,
exacerbating its vulnerabilities in economic terms and intensifying the debt crisis once it
finally came to the surface [10,1].
As if this were not bad enough, anti-euro bets are today an everyday phenomenon, steadily
increasing the probability of breakup. The systemic problems now revealed basically leave
two options for euro area countries: Either they can tackle the euro’s internal institutional
weaknesses, or “descend into a culture of blame which could ultimately rip the whole system
apart” [11]. It seems as if governments have chosen the second option, driven perhaps by
electoral concerns.2 As things stand, voters see their own private interests threatened in the
“haircuts” associated with debt restructuring, and evince little support for a broader fiscal
redistribution mechanism combined with strict control of fiscal soundness, à la Schuknecht et
al. [11-13].
The euro area debt crisis has let old intra-European rivalries reappear on the surface.
However, the stocks of cross-border holdings of assets and liabilities have grown rapidly, and
the implications of failure are much graver than in earlier times. At the same time, the euro
area contains neither a burden-sharing mechanism between nations nor any mechanism
enabling a country to fall into insolvency without hurting the others [3,11]. In such a world,
investors might easily become convinced of the inevitability of a euro breakup, and seek ways
to disentangle themselves from the consequences.
2
This view is supported by the situation in Greece where the formation of a government after the election in
May 2012 failed with the consequence of a re-election in June.
‐4‐ 1.3 The disaster scenario – Characterizing breakup and its consequences
It is often argued that it would be preferable to let the existing euro area break up either by
allowing it to fragment entirely, or by letting one or more countries secede [1]. This paper
demonstrates that merely abolishing the euro is not sufficient for a weak country.
Some observers believe that some kind of fiscal union is in principle a necessary condition
for “saving” the EMU (see, for instance, [14]).3 However, commercial banks (among them
HSBC and UBS) and insurance companies such as Allianz are increasingly publishing studies
outlining the “doomsday” scenario of euro-zone breakup,4 fanning a public debate of
increasing intensity. This paper thus investigates the doomsday scenarios in greater detail and
summarizes the main results.
Monetary unions can break up by secession (a decision to leave, undertaken freely by the
departing member) or the expulsion of a member state (or group of states). Moreover, this can
take place suddenly in the form of a unilateral decision, or more slowly as the outcome of
preceding negotiations [1].
We proceed now by examining some of the economic consequences in more detail, as well
as briefly touching on the likely political impacts of secession.
2. Breakup and doomsday – the scenarios
In our following efforts to derive and describe contingent doomsday scenarios, we
differentiate between the weak- and strong-country cases. Under our working definition,
“weak” countries are those experiencing financial distress, while “strong” countries are those
EMU members that have retained their AAA credit ratings.
2.1 The probable case: a weak country leaves the euro area
2.1.1 The basic mechanics of doomsday with a weak country leaving
According to Roubini [2], “Euro zone politicians may muddle through for another five
years, but ultimately they will face very tough decisions. I see the chances that Greece or Portugal
will leave the euro zone at 30 percent.” The primary reason a country might decide to leave the
euro is to regain the monetary independence which it gave up when joining the EMU,
enabling it to conduct monetary policy in a way that better fits its own economic conditions.
While nominal exchange rates have been frozen, significant divergences in real exchange
rates still exist in the euro area. Consumer prices and wages in peripheral countries have
increased more substantially than have those in Germany since the start of the EMU. This
makes their firms less competitive vis-à-vis German or Asian rivals on international markets.
3
As their base case, analysts such as UBS [1] assume that the EMU will ultimately survive, but with institutional
changes that draw on the recovery of the U.S. monetary union in the 1930s, as well as to the United Kingdom
and Germany, with a fiscal confederation made up of automatic stabilizers rather than direct transfers.
4
Early in September, Der Spiegel reported that a group of government lawmakers sought the power to expel
member countries from the euro zone. Hans-Olaf Henkel, challenging the constitutionality of the Greek rescue
package in the German courts, has proposed that Austria, Finland, Germany, and the Netherlands should secede,
arguing that this alternative would have net benefits both for exiting countries and the remaining euro area.
‐5‐ Some observers contend that seceding from the euro area and devaluing their currencies
would give these countries the ability to align their unit labor costs with Germany and Asian
competitors [15].
In addition, highly indebted euro countries such as Greece, Italy and Spain currently pay
significantly higher interest rates for their loans than Germany. In response, they are seeking to
increase national savings, while restoring or enhancing their competitiveness, but without the
ability to resort to currency devaluation. Moreover, Mediterranean countries see their
membership as a status symbol; hence, it may be at least as likely that northern member states
with sound fiscal policies and high levels of competitiveness will exit [16].
Using the breakdowns of Argentina or Uruguay a decade ago as a guide rather than the
relatively mild European Exchange Rate Mechanism (ERM) I disruptions [5], it is reasonable
to assume that the external value of the currency of a weak country seceding from the euro
zone might fall by up to 60 percent vis-à-vis the “rump euro” bloc. However, large-scale
devaluation and the reintroduction of monetary sovereignty will also have negative economic
and political (side) effects.
First, cross-border capital flows will decline significantly, if assets and liabilities have to
be instantaneously rebalanced following the reinstatement of national currencies. Second,
capital controls would likely be an element of the doomsday mechanics, implemented in order
to give the new and at least initially weak currencies in the periphery some “infant”
protection.5 Third, huge losses in confidence within the financial system would be likely.
Fourth, huge technical and legal hurdles would have to be taken into account by the seceding
country when abandoning the euro. Thus, on the whole, the doomsday scenario should not be
compared with something like the breakdown of the gold standard.6
Indeed, once a country has voluntarily surrendered its national currency and monetary
policy independence to a common currency area and its institutions, the costs of leaving that
monetary union and introducing a new national currency are more than significant. Moreover,
the entry costs can be considered to be sunk ex post, and there will thus be a hysteresis impact
on the optimum currency area (OCA) threshold. The optimum degree of economic integration
which once served as a trigger for a country to join the euro area is higher than the trigger that
induces a member country to leave the common currency area. In this sense, the current
pressing situation in the euro area still calls for a “tolerance band.”7
The switch from national currencies to the euro was smooth in large part because it was
planned over years in great detail, and even more important, in a cooperative manner among
European countries [15,20]. This again indicates that exit from and entry into a common
5
HSBC [11] correspondingly asks: “…Why else would people “choose” to accept a currency likely to be
devalued?”
6
Exiting the gold standard had little effect on cross-border capital flows for the simple reason that, during the
interwar years, cross-border capital holdings were so low. The benefits of monetary independence were therefore
large relative to the costs of disentanglement. See [17]. Today, the reverse is likely to be true [11]; HSBC argues
that the doomsday scenario should ideally be treated as similar to the breakdown of the U.S. banking system in
the wake of the Great Depression.
7
This is an analogy to the exchange rate “band of inaction” as derived by Belke and Goecke [18,19] in a
Krugman-type framework.
‐6‐ currency area have to be treated in an asymmetric fashion. The mere prospect of euro breakup
could cause bank runs in weak economies.
If one country – Greece, for example – exits the euro area, then almost immediately
speculation would begin as to the prospect of other weak economies’ withdrawal. Hence, it is
unrealistic to assume that only a single country would leave. This in turn would raise the costs
of membership for other member countries relative to the benefits of remaining within the
common currency area.
Another key point to consider in analyzing the weak-country doomsday scenario is that the
exiting country, typically a debtor nation heavily dependent on inflows from other countries
in the euro area, would be forced to deflate its economy on a massive scale. Suppressed
economic activity would affect tax revenues negatively and thus lead to higher government
budget deficits. As its capability to finance those deficits on international capital markets
would also be substantially weaker, the seceding weak country would have two basic choices:
Either it would have to accept a domestic program of austerity on a massive scale, or its
newly empowered national central bank would have to activate its printing press with the aim
of creating higher inflation (and inflationary expectations), thus wrecking the value of
domestic savings.8
Any exiting country, no matter whether weak or strong, would also have to take severe
legal challenges into account. The resultant legal uncertainty would create additional
incentives for commercial banks to husband capital rather than extending credit, since banks
might fear being forced to make depositors whole [15,18]. Moreover, foreign banks and
pension funds with weak economies’ euro-denominated government bonds on their balance
sheets would suffer an effective default, and might also be persuaded to sue [15].
2.1.2 Default on domestic debt and breakdown of the domestic banking sector
Any country deciding to exit the euro area essentially has two choices in handling the
denomination of its domestic sovereign debt.
The first approach would be to retain a euro denomination for the entire debt stock.
However, this would mean that the debt would remain denominated in a foreign currency,
over which the seceding country with its new national currency would lack any power of
taxation [1].
The second, and from an historical perspective more probable option would entail the
forced conversion of euro-denominated debt into new debt denominated in the restored
national currency. In this case, however, most investors and even rating agencies would likely
classify this as a default [1]. The seceding weak country might well become euroized. Indeed,
the technical barriers alone to introducing a new currency would be huge.
8
See, for instance, [11]. This would of course be futile in the long run, since the long-term interest rate would
increase to the same extent as inflation expectations. This is exactly the problem confronted by the U.S. Federal
Reserve while conducting its quantitative easing policies. However, the United States has the exorbitant
privilege of being able to shift the damaging effect of its inflationary policies to the rest of the world. This is
certainly not the case for a “small” weak country exiting from the euro area. Hence, it should be compared with
the many former Soviet republics that created domestic inflation in new currencies following the break-up of the
ruble area in 1992 and 1993. [11,20]. ‐7‐ Regardless of the specific mode of conversion, sovereign debt default tends to raise the
government’s long-term cost of capital in industrialized countries, thus threatening to impose
lasting economic costs on a seceding country.9 This said, a few countries even within the euro
area appear increasingly likely to default – as, for instance, Greece and Portugal, neither of
which is today able to maintain a constant level of national capital stock by means of
domestic savings [23].
It is important to note that default would not eliminate the need for fiscal adjustment, as the
primary budget balance of the seceding weak country would still be in deficit. Hence, in the
short term, even more austerity measures would have to be conducted than would be required
under the Troika plan [24].
In order to give reality to the new national currency, which would otherwise degenerate
into a non-functioning and entirely abstract concept, the government of the seceding weak
country would have to instantly redenominate domestic bank deposits into the new currency.
Capital controls would probably have to be implemented for two reasons. First, this would
provide one means of fighting a still-large current account deficit. Second, a ceiling on daily
cash withdrawals might become necessary simply in order to prevent a collapse of the
banking system, which would no longer have access to liquidity provided by the ECB [11].10
However, deposit holders would likely begin sending their money to perceived safe havens
– German bank accounts, for example – as soon as they began to suspect their country might
be about to leave the euro. In other words, the anticipation of weak-country exit alone might
serve as an accelerant of bank runs. In fact, there is evidence that this anticipation has already
set in: Greek bank deposits have shrunk significantly, by nearly 15 percent in the past year
[1,11,25]. 11
Theoretically, the only guaranteed way to prevent a bank run would be to shut the banking
system entirely, or at least put a cap on the volume of withdrawals that could be conducted
over a transition period. The blueprint for this would be the institutional configuration
implemented in the wake of the effective collapse of U.S. monetary union in the years 1932 to
1933 [1,20]. Alternatives would be other forms of capital controls, and perhaps even
restrictions on foreign travel [15].
A “shock” style implementation of the new national currency would in theory represent the
only available means of preventing a run on the domestic banking system. For this purpose,
the conversion cannot be anticipated by the world at large [1]. However, this approach is not
applicable in practice, as the introduction of a new national currency is rather complex.
Indeed, the extreme difficulty of preparing an unanticipated currency conversion is attested to
9
Cruces and Trebesch [21] show empirically that in cases in which no structural change process is credibly
implemented, bond investors actually punish sovereign defaulters for a significant duration. For emerging
countries and transition economies, the general picture is different, as in these cases, financial markets tend to
forget about sovereign default events after a couple of years. See [22].
10
On such an occasion “the wise depositor anticipating the creation of a NNC would withdraw their money in
physical euro form, pack it into a suitcase and head over the nearest international border – unless the government
seals their borders to the movement of people. In that event, the sensible depositor would withdraw their money
in physical euro form, pack it into a suitcase and bury it in their garden” [1].
11
Indeed, Greek citizens have already begun to withdrawn considerable amounts of money from Greek banks
since the unsuccessful formation of a new government in mid may 2012.
‐8‐ by the fact that sudden deposit withdrawals have already regularly been observed in parts of
the euro area when even vague suggestions of secession are made [1].
2.1.3 EU membership at stake
The seceding weak country would have to leave the European Union, and as a
consequence could face the imposition of tariffs or other trade barriers from the remaining
members [20,11]. The country leaving the euro area should expect to be confronted with trade
barriers, from which its full EU member status previously sheltered it. In the absence of
revisions to the EU treaty, seceding from the euro area – like the imposition of capital-flow
barriers – would imply a unilateral breach of several treaties, among them the Treaty of
Maastricht, the Treaty of Lisbon and the Treaty of Rome [1,26]. Moreover, the act of adopting
a new national currency would obviously contradict the guiding lines of the EU project.
A weak country that elects to secede from the euro area would thus also effectively secede
from the union, and would have little scope to negotiate to remain in the EU. Indeed, it would
likely require considerable negotiation to be granted reentry into the EU, if this proved
possible at all. Moreover, according to current versions of the various relevant treaties, the
departing country would technically have to agree ex ante to reenter the euro as soon as it met
Maastricht criteria.
2.1.4 Protectionism back again
The claim that a weak secessionist state would immediately regain a beneficial competitive
advantage through a devaluation of its new national currency vis-à-vis the euro is not overly
realistic, for several reasons. Standard caveats like the J-curve effect12 – that a country long
over-engaged in domestic consumption sometimes has little to export in the short run, or that
the country might not be able to shift its labor force to the export sector quickly enough – are
well-known and do not have to be repeated here in detail [11,27]. Moreover, much as there is
some scope for variation in the optimal degree of integration within OCA theory, we can also
establish a “band of inaction” for the exchange rate within which export volumes react only
minimally to currency fluctuations [18,19].
From a noneconomic perspective, the remaining euro area and EU countries would be
unlikely to watch the secession of the weak country passively and with tranquility. UBS [1],
for instance, argues convincingly that if a new national currency were to depreciate by 60
percent against the euro, it seems highly plausible that the euro area in turn would impose a
60 percent tariff (or even higher) against the exports of the departing country.13 The argument
is bolstered by the fact that the country departing would be left without a trade agreement
with Europe, since leaving the EMU implies exiting the European Union as well.
12
The J-curve effect describes the immediate decline in a country’s current account immediately after a real
currency depreciation, followed by improved only some months later, as most import and export orders are
placed several months in advance. These initial-period decisions are made based on the “old” exchange rate. The
primary effect of the home currency depreciation is to raise the value of the pre-contracted level of imports in
terms of domestic products (i.e., the so-called price effect). Prices in the euro area are automatically affected by a
euro depreciation as soon as import prices increase. In the short term, there is nothing monetary policy can
contribute to offset this effect. See [27]. 13
Ironically, the absence of intra-European exchange rate volatility, to which countries tended to react with
tariffs in pre-EMU times, has been seen as one of the main advantages of EMU. See [5].
‐9‐ 2.1.5 Quantifying economic costs – referencing the UBS and HSBC studies
Our above assumption was that the external value of the currency of a seceding weak
country will fall by up to 60 percent vis-à-vis the “rump euro” bloc. The threat or reality of
mass sovereign and corporate default would subsequently generate an increase in the cost of
capital, or risk premium, of 700 basis points [1]. Secession-induced turmoil and tariffs
imposed by the “rump EU” to compensate for the weak country’s new currency depreciation
could lead to a decline in the volume of trade by as much as 50 percent [1]. Finally, costs
stemming from banking system failure have to be factored in. With a 60 percent depreciation,
UBS [1] assumes a cost equivalent to 60 percent of bank deposits in the system. The same
institution calculates the costs for an alternative scenario under which a bank run has resulted
in 50 percent of current deposits being withdrawn before exit takes place. In this scenario, the
costs would amount to 60 percent of 50 percent of current deposits [1].
Taking the summed costs projected for Southern European countries, the initial economic
cost of a weak country leaving would amount to an estimated €9,500 to €11,500 per person,
or 40 percent to 50 percent of GDP. Although bank recapitalization costs would be a one-time
event, the continuing costs of secession would be a projected €3,000 to €4,000 per person in
subsequent years [1].14
Note that these are still conservative estimates which are of course somewhat arbitrary as they
rest on specific assumptions. For instance, they do not include any economic impacts of civil
disorder or of any internal breakup of the seceding country. McWilliams [28] quantifies the
costs of an organized breakup of the euro area to be around 2% of euro area GDP. However,
if this breakup would be unplanned the costs could increase up to 5% of euro area GDP.
On the other hand, a basic pattern of the present situation is that Germany as the country
which has the largest absolute exposure and that formulates much of the policy imposed on
Greece could also be the one that in the end is likely to lose the least due to its low
refinancing costs and to seniority of public claims on Greece [29]. The real fiscal burden of a
Greek exit would be disproportionally imposed on the weaker euro area members which
would be hit both by the contagion effects and the direct fiscal costs, which for them would be
much higher as a share of GDP. This is especially valid if, the official euro area creditors
would take the long-run view and agree to a standstill. For instance, the official creditors
could be well-advised to grant a grace period of 10 years followed by a full repayment over
the next 20 years (the terms of the latest EFSF deal) and an interest rate of 1.5% (the rate on
Bunds prevailing today) – contingent on the Greek exit from the euro area [29-31].
2.2 The “populist” case: A strong country leaves the euro area
2.2.1 The basic mechanics of doomsday given a strong country departure
The ECB has reacted to overconsumption and high levels of indebtedness in much of the
euro zone in ways that do not obviously fit with basic German preferences.15 However,
14
For further tentative figures see http://blogs.telegraph.co.uk/finance/ambroseevanspritchard/100017148/appetiser-cost-of-greek-exit-is-e155bn-for-germany-france-trillions-for-meat-course/. 15
See, for instance, the intense debate over the motivations of Axel Weber and Juergen Stark in leaving the
ESCB. ‐10‐ Germany’s political commitment to these preferences remains significant [11]. Moreover,
there is a perception among potential guarantor countries that they lack the fiscal capacity to
support over-indebted euro zone member countries (which represent the majority in the euro
area and on the ECB Governing Council); this has in turn been associated with steadily
growing national anti-euro sentiments. Thus, the idea of abandoning the euro has plausibly
become attractive to Germany, as well as to some of the former hard-currency countries such
as the Netherlands, Austria and Finland, which appear to be fiscally comparatively solid and
have strong economic ties with Germany. This group might seek a collective exit from the
euro area in favor of joining a new Deutschmarkbloc, if Germany really were to leave [15].
If a strong country left the euro area, the usual assumption is that there would be an
appreciation of its currency – not least because the strong new national currency would
presumably be sought as a reserve currency by other euro area residents. At the very least,
appreciation of the new national currency relative to the “rump euro” could be envisaged [1].
Since intra-European trade dominates for euro area countries, a real effective appreciation is
thus highly likely. But whether and to what extent the external value of the new national
currency of a strong seceding country also increases vis-à-vis non-euro countries would be a
function of the magnitude of capital flight from the “rump euro” into the new national
currency, and the intensity of newly introduced capital controls [1], among other factors.
Exchange-rate appreciation would likely have a dampening impact on Germany’s export
performance. Since the euro area was created, Germany has managed to increase its
competitiveness relative to previous levels. The recent appreciation of the Swiss franc has
demonstrated the economic impact of adherence to a freely floating hard currency policy,
particularly in an economy with an export-led growth model [11]. A similar assessment is
offered by Michael Burda: “The reintroduced Deutschmark could well appreciate within a
few months by 50 percent,” he said. “That would wipe out the German small and mediumsized enterprises in one fell swoop” [32].16
According to HSBC currency strategists [33], had the core euro zone currencies been
collectively cut adrift from the euro at the end of 2009, moving instead in line with the Swiss
franc – a supposition consistent with pre-euro-zone experience – the “core” euro (EUC)
would have appreciated against the "rump euro" by 83%, ie EUR1 = EUC1.83, a value
considerably higher than the euro today [11]. According to Bundesbank calculations in 1998 –
when the German currency still existed – this degree of increase, if maintained, might have
been sufficient to lower German exports by 16 percent [11].17
A strong secessionist country such as Germany would of course find itself in a much better
position than a weak country. If it opted out of euro membership, it would not necessarily
seek to convert its stock of euro-denominated debt to debt denominated in a new and stronger
currency. Rather, it would be much more natural to opt for gradual repayment of those
depreciating (if measured in the new national currency) debts [15].
16
In the past, Germany profited from moderate appreciation of the Deutschmark, in much the same way as the
Czech Republic does today with its crown, as this allows imported inflation to be avoided.
17
However, these estimates are put into perspective by the Belke and Goecke [19] threshold model, which shows
that German trade is impacted heavily only by appreciations that exceed a certain “pain threshold.”
‐11‐ A somewhat hidden cost for Germany would be the country’s loss of influence on the
monetary policy stance in the euro area, particularly if the ECB elected to allow higher
inflation rates after the withdrawal of the German ECB Council members [34,35]. Inflation
would erode the real substance of German loans provided to euro area banks, corporations and
governments [15].
2.2.2 Default on domestic debt and breakdown of the domestic banking system
Unlike in the case of a secession of a weak country, a seceding strong country might see
improvements in its fiscal position. A strong country’s government would not have any
incentive to default on its domestic debt; because the new national currency would appreciate
against the euro, the value of euro-denominated debt would in turn decline relative to tax
revenues denominated in the new national currency [1].
Repaying domestic bondholders in euros even after having exited the euro area would not
be problematic for a government in legal terms. However, in political terms, the fact that
bondholders would be receiving income in euros but have obligations which include taxes in
the new national currency would have to be taken into account. For them, this might not be
acceptable [1].
In contrast, corporate euro-denominated liabilities to domestic banks would eventually
pose a problem, because they would have to be converted into the new national currency.
Otherwise the euro as “bad” money would drive out “good” money – that is, the new national
currency would be hoarded and the euro become the preferred currency for liabilities (a
manifestation of Gresham’s Law; see [17]). UBS [1] concludes that “…any company that has
a significant proportion of its revenues deriving from euro-denominated exports, but which
has liabilities to the domestic banking system, [would be] vulnerable to default.” Since assets
located elsewhere would also depreciate in terms of the new national currency quite quickly
after secession, companies’ balance sheets would be negatively impacted [1].
A strong country like Germany would be unlikely to experience a run on its banking
system as a result of currency union secession. This is because depositors have no reason to
withdraw their money in order to avoid perceived losses of value. On the contrary, there could
well be international inflows in the form of bank deposits.
In contrast, the balance sheet would be critical for commercial banks in the seceding strong
country. The country’s banking system would now be characterized by new national currency
liabilities. On the asset side, however, not all assets from the former euro area would be
redenominated into the new national currency. Some would likely remain denominated in the
“rump euro” currency [1]. If the new national currency appreciates by 40 percent to 50
percent vis-à-vis the “rump euro,” this constellation could require a recapitalization of the
banking system – simply because foreign assets denominated in euro would be worth less
from a domestic perspective [11]. More broadly, the secession of Germany (or any other
strong country) from the euro area would be associated with the devaluation of external assets
held not only by domestic banks, but also of those held by households and companies [11].
At this stage we assess a hypothetical further chain of events, as previously conducted for
the weak-country secession scenario.
‐12‐ 2.2.3 EU membership at stake as well
The arguments that apply to weak country secession apply to the strong country case as
well. From a legal perspective, Once a European country has adopted the common currency, it
either retains both EU and euro membership, or forswears them both. There is no middleground compromise available [1]. For example, Germany would have to leave the European
Union in this case. It can be regarded as highly unrealistic that the euro could survive the
departure of its biggest economy [11].
2.2.4 Protectionism mark II
UBS [1] argues that a strong seceding country would effectively have to write off its
export industry due to the effects of currency appreciation and the loss of EU-connected free
trade. The substantial appreciation of the new Deutschmark (DM) vis-à-vis the “rump euro”
would destroy the German export industry’s bilateral and international competitiveness.
However, this statement is only valid if the new DM-euro exchange rate moved within the
“band of inaction” beyond the exchange rate “pain threshold.” Belke and Goecke [19] show
that Germany’s export volumes are largely unaffected by dollar-euro exchange rate changes
up to 24 euro cents per dollar cent, and offer several explanations as to why German exports
are so inelastic vis-à-vis exchange rate changes. However, the estimated appreciation of the
new DM in such a secession scenario would be of a magnitude that makes passage of the
“pain threshold” more than probable. Outside the European Union too, the export sector of a
strong exiting economy would be put at a competitive disadvantage, because the “rump euro”
would most probably not agree to allow the “apostate state” to continue to benefit from EU
free trade regimes [1].
2.2.5 Quantifying economic costs – referencing the UBS and HSBC studies
As argued above, it seems reasonable to assume an appreciation of the seceding strong
country’s currency of 40 percent. On the one hand, the appreciation could be even higher due
to ex ante capital flight into the strong currency. But on the other hand, capital controls or
regulation of flows might be imposed during a disorderly secession process, thus limiting
appreciation.18
The need to recapitalize the domestic banking system raises the risk premium and leads to
specific costs. UBS [1] argues that the increase in the risk premium should be lower than in
the case of weak country secession, but still considers an increase of 200 basis points to be
realistic. Costs emerge because the impact of currency appreciation on bank balance sheets
has to be offset. Even if some liabilities stay denominated in the “rump euro,” which German
banks would be able to service more readily, there is the risk of outright default on some of
their assets [1].
Finally, the trade impacts of the appreciation itself, as well as of the erection of reciprocal
trade barriers, border disruptions and exit-caused reductions in growth in the remaining euro
area have to be taken into account. UBS [1] assumes a rather conservative 20 percent
reduction in overall trade volumes. In sum, in the case of Germany’s secession, costs would
18
See [6] and [1]. For a historical example see the break-up of the Czech Republic-Slovakia monetary union in
the early 1990s [20]. ‐13‐ total between €6,000 and €8,000 per person [1]. Though the recapitalization of the banking
system would be a one-time event, there would still be costs of between €3,500 and €4,500
per person per year after the exit year. This corresponds to 20 percent to 25 percent of GDP in
the first year [1]; in comparison, the costs of a joint debt default by Greece, Ireland and
Portugal, along with a 50 percent debt-restructuring “haircut,” would amount to slightly more
than €1,000 per person in Germany [1,22].
In addition to economic costs, the political costs of breakup would also have to be taken
into account – no matter whether it was a strong or weak country leaving and thus
fragmenting the euro. For instance, the influence of the European Union within international
organizations such as the IMF would be diminished. Moreover, it is worth considering that
almost no modern monetary unions based on a fiat currency (i.e., without asset backing) have
broken up without provoking centrifugal forces such as military or other authoritarian
government, or even in the extreme case, civil war. Internal divisions along ethnic or
linguistic lines in countries such as Belgium, Italy and Spain could be exacerbated by the exit
issue [20,1]. In the wake of the breakup of the Czech-Slovak monetary union in 1993,
Slovakia’s respect for political rights and civil liberties declined, according to assessments
using the Freedom House criteria [20,36]. Finally, the breakup of the Soviet Union too
enabled the evolution of authoritarian regimes in the successor states, and some observers
even characterize the temporary fragmentation within the U.S. monetary union in 1932 – 1933
as having led to a more authoritarian leadership style [1]. Violence accompanied the
separation of Ireland from the United Kingdom, as well as the difficulties of the Latin
Monetary Union during and after the Franco-Prussian war in 1870 [1].
Even in a strong seceding country like Germany, economic dislocation in the form of
higher unemployment in the tradable goods sector might become structural (i.e., hysteretic)
and thus lead to social tension, although domestic savings stocks would not be damaged, and
the negative impact of secession would be less severe than would be the case for weak
currencies [1].
3. Conclusions
It cannot be excluded a priori that the economic costs of a doomsday scenario – a breakup
of the euro area – would be high and extremely damaging, especially in the case of a weak
country’s departure. It seems at first glance as if the costs of breakup would be lower if a
strong country were to secede.19 However, in this case, the euro area would lose its pillar of
stability, and the probability of a collapse of the whole EMU project would be even greater.
From a hysteresis point of view, euro area member countries appear stuck in their common
currency area. However, any determined country could leave the euro and reestablish its own
currency if a “pain threshold” is reached after having passed through a long period of imposed
austerity and high unemployment inside the common currency area. But in this case, high
costs would remain to be borne, and a banking crisis and social unrest would almost certainly
follow in the wake of an enforced currency conversion. This is also valid for the departure of
19
This fits with our assessment in section 2 that it may be at least as likely that the Northern member states with
sound fiscal policy and high competitiveness will exit [16]. ‐14‐ stronger countries. Germany might have several well-founded reasons for leaving the euro
area, among them some of the most valuable principles of “Ordnungspolitik”. However, the
achievement of greater monetary and fiscal stability should not be included in this list, as a
German exit would create domestic financial disarray for quite a long time [15].
The political costs of the doomsday scenario – a true breakup of the Euro area – are too
great to be quantified in financial terms, no matter whether a weak or a strong country that
secedes. Nevertheless, the time may come in which only a little additional shock is sufficient
to shift the whole EMU project to a new trajectory, forcing its collapse. This could be the case
if a “pain threshold” is reached after a considerable period of strain and pain, creating a
climate for conducive to breakup (hysteresis).
Finally, it cannot be stressed often enough that any collapse of the euro zone and the
resulting EU fragmentation would do significant damage to the European Union’s
international position and influence.
References
[1] UBS. Euro breakup – the consequences. UBS Investment Research - Global Economic
Perspectives 2011.
[2] Roubini, N. The eurozone heads for breakup, Financial Times. June 13 2011.
[3] Gros, D.; Mayer, T. Towards a Euro(pean) Monetary Fund, CEPS Commentaries, CEPS,
Brussels 2010.
[4] Feldstein, M. The political economy of the European Economic and Monetary Union:
political sources of an economic liability. Journal of Economic Perspectives 1997,
11(4), 23-42.
[5] Belke, A.; Gros, D. Monetary Integration in the Southern Cone. North American Journal
of Economics and Finance 2002, 13(3), 323-349.
[6] Krugman, P.R.; Obstfeld, M.; Mélitz, M.J. International economics – theory & policy, 9th
ed., Pearson, Boston et al. 2011.
[7] Belke, A. Change of guards from Trichet to Draghi – Watch or not to watch money under
political constraints. Briefing paper prepared for presentation at the Committee on
Economic and Monetary Affairs of the European Parliament for the quarterly
dialogue with the President of the European Central Bank 2011c.
[8] Reinhart, C.; Rogoff, K. This time it’s different – Eight centuries of financial folly.
Princeton University Press 2010.
[9] Belke, A. Als letzter Ausweg droht Inflation. Frankfurter Allgemeine Zeitung 2011d, 17,
12.
[10] Belke, A. Der Euro ist nicht für alle da. Focus Money Online 2010.
[11] HSBC. How to solve the euro’s problems – and why failure threatens another Great
Depression. Economics Global 2011.
[12] Schuknecht, L.; Moutot, P.; Rother, J.; Stark, J. The Stability and Growth Pact – crisis
and reform, ECB Occasional Paper, European Central Bank, Frankfurt/Main,
September 2011, 129.
[13] Feldstein, M. The Breakup of the Euro Area. Comment 2008.
‐15‐ [14] Begg, I.; Belke, A.; Dullien, S.; Schwarzer, D.; Vilpisauskas, R. European Governance –
Impulses for Crisis Prevention, Europe in Dialogue 2011/02, Bertelsmann Stiftung,
Gütersloh/ Roubini, N. 2011.
[15] The Economist. Breaking up the euro area - How to resign from the club 2010.
[16] Voth, H.J. Die Spaltung der EU wäre gut. http://www.euractiv.de/druckversion/artikel/hans-joachim-voth-die-spa... 4.07.09.2011 2011.
[17] Belke, A.; Polleit, T. Monetary economics in globalized financial markets. Springer,
Dordrecht et al. 2010.
[18] Belke, A.; Goecke, M. Real Options Effects on Employment: Does Exchange Rate
Uncertainty Matter for Aggregation?. German Economic Review 2005, 6(2), 185-203.
[19] Belke, A.; Goecke, M.; Günther, M. When Does It Hurt? The Exchange Rate “Pain
Threshold” for German Exports. DIW Discussion Paper 2009, 943.
[20] Eichengreen, B. The breakup of the euro area. NBER Working Paper 2008, 13393.
[21] Cruces, J.; Trebesch, C. Sovereign defaults: The price of haircuts. Universidad Torcuato
Di Tella and Free University Berlin 2011.
[22] Belke, A.; Dreger, C. Ramifications of Debt Restructuring on the Euro Area – The
Example of Large European Economies’ Exposure to Greece. Intereconomics 2011,
46/4, 188-196.
[23] Gros, D.; Mayer, T. What do to when the euro crisis reaches the core. CEPS
Commentaries, CEPS, 2011.
[24]
Gruener,
H.
P.
Der
Austritt
Griechenlands
wäre
ein
Fehler.
http://blog.handelsblatt.com/handelsblog/2011/07/20/der-austritt-griechenlands-wareein-fehler/ 2011.
[25]Flanders, S. Eurozone crisis: What would a breakup look like? http://www.
Flanders.co.uk/news/mobile/business-142038241. FLANDERS News 2011.
[26] Athanassiou, P. Withdrawal and expulsion from the EU and EMU – Some reflections.
ECB Legal, European Central Bank, ECB Legal Working Paper 2009, 10.
[27] ECB Observer. Liquidity on the rise - too much money chasing too few goods. Part 1: A
case against ECB FX market interventions, A. Belke, W. Koesters, M. Leschke, T.
Polleit (eds.), Frankfurt/Main 2004.
[28] McWilliams, D. The end of the euro in its current form is certain but will be traumatic.
http://www.cebr.com/wp-content/uploads/End-of-the-euro-in-its-present-form-iscertain-Compatibility-Mode.pdf (accessed on 5 May 2012).
[29] Alcidi, C.; Giovannini, A.; Gros, D. ‘Grexit!: Wo would pay for it?. CEPS Policy Brief,
Centre for European Policy Studies 2012, 272.
[30] Belke, A. Anhörung Haushaltsausschuss des Deutschen Bundestages zum Nachtrag zum
Bundeshaushaltsplan
für
das
Haushaltsjahr
2012,
Berlin,
http://www.bundestag.de/bundestag/ausschuesse17/a08/anhoerungen/Nachtragshausha
ltsgesetz_2012/Stellungnahmen/Prof__Dr__Ansgar_Belke.pdf 2012.
[31] Borenzstein, E.; Panizza, U. The costs of sovereign default: Theory and reality.
VoxEU.org 2010.
[32]
Handelsblatt.
Wiedereinführung
der
DM
wäre
eine
Katastrophe,
http://www.handelsblatt.com/politik/oekonomie/nachrichten/wiedereinfuehrung-der-dmark-waere-katastrophe/4495958.html 2011a.
[33] HSBC. EUR and CHF: where core EUR might have been. Global Research, Macro
Currency Strategy, Currency Weekly 2011a.
‐16‐ [34] Belke, A.; Styczynska, B. The allocation of power in the enlarged ECB Governing
Council - An assessment of the ECB rotation model. Journal of Common Market
Studies 2006, 44, 865-895.
[35] Belke, A.; von Schnurbein, B. European monetary policy and the ECB rotation model Voting power of the core versus the periphery, forthcoming in Public Choice 2011.
[36] Fidrmuc, J.; Horvath J.; Fidrmuc, J. Stability of monetary Unions: Lessons from the
breakup of Czechoslovakia. Journal of Comparative Economics 1999, 27, 753-781.
‐17‐ The following ROME Discussion Papers have been published since 2007:
1
2007 Quo vadis, Geldmenge? Zur Rolle der Geldmenge
für eine moderne Geldpolitik
Egon Görgens
Karlheinz Ruckriegel
Franz Seitz
2
2007 Money and Inflation. Lessons from the US for ECB
Monetary Policy
Ansgar Belke
Thorsten Polleit
3
2007 Two-Pillar Monetary Policy and Bootstrap
Expectations
Peter Spahn
4
2007 Money and Housing – Evidence for the Euro Area
and the US
Claus Greiber
Ralph Setzer
5
2007 Interest on Reserves and the Flexibility of
Monetary Policy in the Euro Area
Ulrike Neyer
1
2008 Money: A Market Microstructure Approach
Malte Krueger
2
2008 Global Liquidity and House Prices:
A VAR Analysis for OECD Countries
Ansgar Belke
Walter Orth
Ralph Setzer
3
2008 Measuring the Quality of Eligible Collateral
Philipp Lehmbecker
Martin Missong
4
2008 The Quality of Eligible Collateral and Monetary
Stability: An Empirical Analysis
Philipp Lehmbecker
5
2008 Interest Rate Pass-Through in Germany and the
Euro Area
Julia von Borstel
1
2009 Interest Rate Rules and Monetary Targeting: What
are the Links?
Christina Gerberding
Franz Seitz
Andreas Worms
2
2009 Current Account Imbalances and Structural
Adjustment in the Euro Area: How to Rebalance
Competitiveness
Ansgar Belke
Gunther Schnabl
Holger Zemanek
3
2009 A Simple Model of an Oil Based Global Savings
Glut – The “China Factor” and the OPEC Cartel
Ansgar Belke
Daniel Gros
4
2009 Die Auswirkungen der Geldmenge und des
Kreditvolumens auf die Immobilienpreise – Ein
ARDL-Ansatz für Deutschland
Ansgar Belke
5
2009 Does the ECB rely on a Taylor Rule? Comparing
Ex-Post with Real Time Data
Ansgar Belke
Jens Klose
6
2009 How Stable Are Monetary Models of the DollarEuro Exchange Rate? A Time-varying Coefficient
Approach
Joscha Beckmann
Ansgar Belke
Michael Kühl
7
2009 The Importance of Global Shocks for National
Policymakers – Rising Challenges for Central
Banks
Ansgar Belke
Andreas Rees
8
2009 Pricing of Payments
Malte Krüger
1
2010 (How) Do the ECB and the Fed React to Financial
Market Uncertainty? The Taylor Rule in Times of
Crisis
Ansgar Belke
Jens Klose
2
2010 Monetary Policy, Global Liquidity and Commodity
Price Dynamics
Ansgar Belke
Ingo G. Bordon
Torben W. Hendricks
3
2010 Is Euro Area Money Demand (Still) Stable?
Cointegrated VAR versus Single Equation
Techniques
Ansgar Belke
Robert Czudaj
4
2010 European Monetary Policy and the ECB Rotation
Model Voting Power of the Core versus the
Periphery
Ansgar Belke
Barbara von Schnurbein
5
2010 Short-term Oil Models before and during the
Financial Market Crisis
Jörg Clostermann
Nikolaus Keis
Franz Seitz
6
2010 Financial Crisis, Global Liquidity and Monetary
Exit Strategies
Ansgar Belke
7
2010 How much Fiscal Backing must the ECB have?
The Euro Area is not the Philippines
Ansgar Belke
8
2010 Staatliche Schuldenkrisen – Das Beispiel
Griechenland
Heinz-Dieter Smeets
9
2010 Heterogeneity in Money Holdings across Euro Area Ralph Setzer
Countries: The Role of Housing
Paul van den Noord
Guntram B. Wolff
10 2010 Driven by the Markets? ECB Sovereign Bond
Purchases and the Securities Markets Programme
Ansgar Belke
11 2010 Asset Prices, Inflation and Monetary Control –
Re-inventing Money as a Policy Tool
Peter Spahn
12 2010 The Euro Area Crisis Management Framework:
Consequences and Institutional Follow-ups
Ansgar Belke
13 2010 Liquiditätspräferenz, endogenes Geld und
Finanzmärkte
Peter Spahn
14 2010 Reinforcing EU Governance in Times of Crisis:
The Commission Proposals and beyond
Ansgar Belke
01 2011 Current Account Imbalances in the Euro Area:
Catching up or Competitiveness?
Ansgar Belke
Christian Dreger
02 2011 Volatility Patterns of CDS, Bond and Stock
Markets before and during the Financial Crisis:
Evidence from Major Financial Institutions
Ansgar Belke
Christian Gokus
03 2011 Cross-section Dependence and the Monetary
Exchange Rate Model – A Panel Analysis
Joscha Beckmann
Ansgar Belke
Frauke Dobnik
04 2011 Ramifications of Debt Restructuring on the Euro
Area – The Example of Large European Economies’ Exposure to Greece
Ansgar Belke
Christian Dreger
05 2011 Currency Movements Within and Outside a
Currency Union: The Case of Germany and the
Euro Area
Nikolaus Bartzsch
Gerhard Rösl
Franz Seitz
01 2012 Effects of Global Liquidity on Commodity and
Food Prices
Ansgar Belke
Ingo Bordon
Ulrich Volz
02 2012 Exchange Rate Bands of Inaction and PlayHysteresis in German Exports – Sectoral Evidence
for Some OECD Destinations
Ansgar Belke
Matthias Göcke
Martin Günther
03 2012 Do Wealthier Households Save More? The Impact
of the Demographic Factor
Ansgar Belke
Christian Dreger
Richard Ochmann
04 2012 Modifying Taylor Reaction Functions in Presence
of the Zero-Lower-Bound – Evidence for the ECB
and the Fed
Ansgar Belke
Jens Klose
05 2012 Interest Rate Pass-Through in the EMU – New
Joscha Beckmann
Evidence from Nonlinear Cointegration Techniques Ansgar Belke
for Fully Harmonized Data
Florian Verheyen
06 2012 Monetary Commitment and Structural Reforms: A
Dynamic Panel Analysis for Transition Economies
Ansgar Belke
Lukas Vogel
07 2012 The Credibility of Monetary Policy Announcements: Empirical Evidence for OECD Countries
since the 1960s
Ansgar Belke
Andreas Freytag
Jonas Keil
Friedrich Schneider
01 2013 The Role of Money in Modern Macro Models
Franz Seitz
Markus A. Schmidt
02 2013 Sezession: Ein gefährliches Spiel
Malte Krüger
03 2013 A More Effective Euro Area Monetary Policy than
OMTs – Gold Back Sovereign Debt
Ansgar Belke
04 2013 Towards a Genuine Economic and Monetary Union
– Comments on a Roadmap
Ansgar Belke
05 2013 Impact of a Low Interest Rate Environment –
Global Liquidity Spillovers and the Search-foryield
Ansgar Belke
06 2013 Exchange Rate Pass-Through into German Import
Prices – A Disaggregated Perspective
Joscha Beckmann
Ansgar Belke
Florian Verheyen
07 2013 Foreign Exchange Market Interventions and the $¥ Exchange Rate in the Long Run
Joscha Beckmann
Ansgar Belke
Michael Kühl
08 2013 Money, Stock Prices and Central Banks – CrossCountry Comparisons of Cointegrated VAR
Models
Ansgar Belke
Marcel Wiedmann
09 2013 3-Year LTROs – A First Assessment of a NonStandard Policy Measure
Ansgar Belke
10 2013 Finance Access of SMEs: What Role for the ECB?
Ansgar Belke
11 2013 Doomsday for the Euro Area – Causes, Variants
and Consequences of Breakup
Ansgar Belke
Florian Verheyen